With Finance Act 2016, advertising services and goods online will become expensive with introduction of Equalization Levy Tax. The reason for introduction of this levy as lot of multi-national companies engaged in business of media and advertising are earning profits without paying any income tax in India as well as it was increasingly become difficult for tax authorities to tax them.
Therefore to over this, burden has been placed on the service receiver.
Typically non-resident service providers receive the payment in advance via credit cards or through payments gateway like PayPal. Therefore , there is no way to deduct tax at source unless money is directly transferred from bank account, but to comply with this rule, the service receiver has to pay money out of his own pocket thus reducing profits in the process.
Below is the summary of the Equalization Levy Tax
| When it is Applicable | Rate of Tax | When the Tax should be remitted | Interest on Late Payment | Penalty |
| When the Advertising online amount payable to non-resident exceeds one lac and who does not have permanent establishment in India | 6% | On or before 7th of succeeding month | 1% per month | 1000 per day for number of days of default subject to the levy tax |
How to Pay Equalization Levy Tax
Go to https://onlineservices.tin.egov-nsdl.com/etaxnew/tdsnontds.jsp
Select the Challan no. 285 to pay. Below is the screenshot:
Example of industries which will be impacted are:
- Ecommerce: Ecommerce companies heavily rely on the platforms to market their products or services. They typically use re-marketing platforms, PPC websites, banner brokerage houses
- Freelancers: Typically freelancers advertise their business online to get overseas work or assignment.
- Outsourcing companies: Lot of small to medium outsourcing companies regularly use aggregator platform to reach overseas clients. In such scenarios, advertising will become costly
- Internet Marketing: Lot of internet marketing companies uses the services of non-resident to penetrate the target market.
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